Why we're doing stuff, not buying stuff

Pascoe’s Law of Stuff states that stuff expands to fill available space. Live in a small unit, it will be full. Live in a big house for a while, it also will be full.

The corollary is that less space means less stuff – as anyone who’s downsized knows only too painfully. And what follows from that is, if people can have fewer things, they’ll react by spending more on services and experiences.

It’s in keeping with the trend of wealthy nations that we exchange increasing proportions of money for experiences and services, rather than «thiiiings». Photo: Gilaxia

That’s been my theory, supported by observation, speculation and the odd Australian Bureau of Statistics survey, such as those showing our spending on cafes and restaurants is outstripping general retail sales.

The easy headline is that NAB customers – a large and reasonably representative sample of Australians – made a lemming-like dash for Ticketek in the June quarter. Spending on «arts and recreation services» soared 35 per cent on the previous corresponding quarter, with the star sub-category «creative and performing arts».

NAB chief economist Alan Oster admits some mystification about such a large movement.

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His team wondered if there were particularly hot concerts in the offing, if the nation’s art galleries all had blockbuster touring exhibitions, if it was the autumn of theatre’s content. The economists went looking, but couldn’t find specific triggers – we just want to go out.

And the second-biggest movement was in «accommodation and food services», up a fat 10.5 per cent. The barista economy alive and thriving, dinner and show, spending money on an experience.

Of 15 categories of consumer spending growth, the top seven all finish with the word «services» before getting to «retail trade» in eighth place. Total consumer spending, excluding taxes and debt servicing, grew 3.9 per cent – 18 per cent more than retail trade.

As NAB comes to terms with the possibilities of big data, analysing customer spending is proving a rich field capable of telling us much more about what we do and how we live through what and where we’re spending.

There’s a temptation for retailers to blame consumers when their tills aren’t ringing, but it’s more likely to be the competition, not just from other retailers but other enticements for consumers to part with money.

NAB has a considerable advantage over the ABS as Big Data analysis evolves. For a start, the banks capture what all their customers actually spend – some 4 million transactions a day via any electronic device – credit and debit cards, BPay, direct debit, whatever – as opposed to what a much smaller sample of people remember to tell the ABS. That spending can then be analysed down to individual postcodes.

It remains an evolving science. The quarterly customer spending behaviour, for example, is not seasonally adjusted, which results in some oddities: spending on electricity, gas, water and waste services was in effect flat in the June quarter. Oster explains that the big price hike occurred in July.

The good news for the economy was that spending growth picked up from the March quarter’s 2 per cent year-on-year figure. The bad news is that other, more immediate NAB analysis indicates a sharp slowdown in August retail spending.

Once upon a time, «retail spending» was taken as the automatic proxy for consumer spending, but its share of wallet has been steadily decreasing.

(And within retail trade, department stores are steadily shrinking – the smallest of the six ABS retail trade categories, they made up just 5.7 per cent of July’s total spend. Yes, Myer and DJs do receive disproportionate coverage.)

There’s a temptation for retailers to blame consumers when their tills aren’t ringing, but it’s more likely to be the competition, not just from other retailers but other enticements for consumers to part with money.

There’s a brilliantly sharp cartoon in the current edition of the New Yorker showing a sideshow alley barker pushing a cart of assorted tat and shouting: «Thiiiings! Things instead of money!»

It’s in keeping with the trend of wealthy nations that we exchange increasing proportions of money for experiences and services, rather than «thiiiings».

Back to Pascoe’s Law of Stuff, the downsizing to units and townhouses instead of traditional large houses is happening at the margin, given the extent of legacy housing, but it is happening. Building approvals for units have been roughly one-for-one with detached houses over the past few years, led by much higher proportions in Sydney and Melbourne.

The ABS reports that 10 per cent of us spent Census night in an apartment last year. There is now one occupied apartment for every five occupied houses, down from one to seven in 1991.

The number of occupied apartments has increased by 78 per cent over the past quarter century to 1.2 million dwellings. Somewhat surprisingly, the fastest rate of growth in apartments – 20 per cent – was between 1991 and 1996.

There’s also the effect of a higher proportion of us renting – when there’s the prospect of having to pack it all up and move regularly, let alone the reality of a share house, there’s less incentive to go large on things.

With less space then, with less room for things, it’s reasonable to think we might be prepared to spend a bit more on the things we do buy, as well as spending more on experiences.

People tend to live differently in a unit – they don’t have to stay at home on the weekend to mow the lawn or fix the front gate, they’re more likely to lock the door and go away for the weekend, more likely to meet friends in cafes than have them over, more likely to shop smaller but more often. And maybe they’re keener to see a concert or show.

The move into smaller spaces in our main cities is steadily changing everything. The loss of backyard cricket at Mum’s is only the obvious bit.